Pinnacle Financial Partners Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jared Shaw - Barclays - Analyst : So maybe just the first -- I appreciate the discussion around the uncertainty here. Did you change the baseline assumption under CECL? For calculating the reserves if you go to an adverse scenario? Or are you just keeping it unchanged?

Question: Jared Shaw - Barclays - Analyst : Okay. And then on BHG, that's great, great quarter there with the securitization. It feels like the securitization market is a little locked up right now. Is that growth or that higher target dependent on continued securitizations? Or is there flexibility there that they can hold more through the -- or they can place more through the bank sale channel?

Question: Jared Shaw - Barclays - Analyst : Okay. And then just on the other fees, where are we seeing the most offset to that higher BHG target, is that in the other or other equity investments or --

Question: Ben Gerlinger - Citi - Analyst : So when you guys move into the full year guide unchanged for loan and deposits -- well, first, congrats on a strong start to the year. I think, Harold, you said that deposits could slow a little bit here in 2Q. I think you said you cited tax reasons. I'm just trying to think of like 1Q had really strong loan growth and even stronger deposit growth. Do you think that will flip in 2Q or just a seasonality? Or is it pricing you're willing to let some walk away? I get the loan side is strong because of bankers added over time and they way got created over 20 years. So that makes sense to me. I'm just trying to think like fits and starts, you're expecting on the deposit side.

Question: Ben Gerlinger - Citi - Analyst : Yes, that was helpful. And then just thinking about loans and the pricing component of them relative to potential payoffs, like we've seen the yield curve be pretty crazy over day-to-day range so far this month? So I don't necessarily think there's a lot of payoff potential. But if we see the middle of the bell of the curve come in, a little bit like a five-year, do you think there's potential payoff headwinds in CRE and you're comfortable with the current range in that scenario? I'm just trying to think through -- you guys have been more C&I growth lately to reset the industry or should have, but legacy products are also terming out a little bit here, too. So people might get the bid if there is a refinance opportunity.

Question: Ben Gerlinger - Citi - Analyst : Got you. And if I could sneak one more in. BHG, it seems like it's an improvement relative to what it might have been 90 days ago. Has the family or you guys changed any thoughts on stake of ownership?

Question: Catherine Mealor - Keefe, Bruyette & Woods North America - Analyst : Apologies if you addressed this in your prepared remarks, but I just was curious if you could talk a little bit about slide 20, which is the lines of credit that you give per loan type and just how you would expect those to move as we move through the year?

Question: Catherine Mealor - Keefe, Bruyette & Woods North America - Analyst : Great. So really, the growth outlook that you have isn't -- there doesn't seem to be a change necessarily in how you're thinking about lines of credit. It's still customer -- bringing new customers over ramping up your new markets, your new revenue producers and it's all just still market share -- base line of credit change. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 1:30PM, PNFP.OQ - Q1 2025 Pinnacle Financial Partners Inc Earnings Call

Question: Catherine Mealor - Keefe, Bruyette & Woods North America - Analyst : Got it. That makes sense. And then on the margin outlook, I know originally, you had talked about the margin being a little bit more stable in the first half of the year and then expanding in the second half of the year as we get some cuts. Can you just talk a little bit about sensitivity to that with the rate environment? It feels like you're a little bit more neutral today than you have been and cast your ability to lower deposit costs has been really great. But just curious if there's a little bit more risk to that back half of the year, expansion in the margin.

Question: Timur Braziler - Wells Fargo Securities, LLC - Analyst : Rounding out the growth conversation, I guess, and what type of an environment might the RM consolidation story not play out or in what type of environment might you not want to take on those types of those loans? And I guess just from where you're seeing today versus just a couple of months ago. What are you seeing from the borrower side? And what is the internal appetite to continue growing the balance sheet to some of this uncertainty? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 1:30PM, PNFP.OQ - Q1 2025 Pinnacle Financial Partners Inc Earnings Call

Question: Timur Braziler - Wells Fargo Securities, LLC - Analyst : Great. Maybe switching to BHG. I know it's only been 15 days in the new quarter, but a lot has changed. I'm just wondering what the demand is for that paper for the partner banks? Has there been a marked stepping away from some of that demand subsequent liberation day? Or the origination activity that we saw in 1Q pretty indicative for the type of activity you're expecting here more so in the near term?

Question: Timur Braziler - Wells Fargo Securities, LLC - Analyst : Okay. And then just last for me, the timing of the bond restructure.

Question: Michael Rose - Raymond James - Analyst : Just wanted to start on, I think, in the prepared remarks, you talked about some portfolio you'd be doing some work on to assess the impacts of the tariffs. Sorry if I missed it, but can you just describe what are the first areas of focus for you guys? And how encompassing this review would be?

Question: Michael Rose - Raymond James - Analyst : Okay. And then if there's any -- the longer this goes on, right, the more pressure there would be. So there could be potentially some reserve build perhaps related to that, if things continue, I would assume?

Question: Michael Rose - Raymond James - Analyst : Okay. Perfect. And then thanks for all the -- I appreciate all the color on slide 10 on the betas, both on the loan and deposit side. I think you mentioned that you have some ability to continue to lower cost. Can you just be more specific around that in terms of how much? I'm sorry if I missed it in the slides, what's coming up for renewal this year? The CD percentage is around 10% is the room for that to come down? Just some greater color on beta expectations as you move forward. I know it's hard with the curve moving every day, but just any help would be great.

Question: Michael Rose - Raymond James - Analyst : Okay. Great. Maybe just final one for me. In the release, you mentioned maybe pursuing other geographies for expansion. I know you've successfully obviously gone to Atlanta, Jacksonville, the D.C. market. But it read that maybe that could be an option, maybe I'm reading into it but nearer term. But just give us any thoughts around -- I know you talked about Florida before, just some other markets that would be of interest to you. And is that where you plan to be opportunistic at the just markets should be interested.

Question: Casey Haire - Autonomous Research - Analyst : Follow-up on the NIM loan yields. Just wondering, I know you guys have some Fed cuts, what you're expecting, but ex those have loan yields bottomed at this, call it, low 6% level, given the fixed rate repricing opportunities and new money yields coming on in the 6s.

Question: Casey Haire - Autonomous Research - Analyst : Right. Yes. Okay. I mean I was thinking more along the lines of ex cuts, like the June cut probably in factor much into the second quarter. But okay. Understood.

Question: Casey Haire - Autonomous Research - Analyst : Okay. And then on the expense side of things, so you're the -- you guys don't -- you're hiring at a pretty fast clip here. right on pace with last year, which was a record year. How is that pipeline shaping up for the balance of the year? And does this expense guide support that level of hiring?

Question: Casey Haire - Autonomous Research - Analyst : Okay. Great. And just lastly on the capital front. The CET1 ratio, assume that would bleed a little bit lower given the growth outlook that you have? Just how comfortable where would you no longer feel comfortable? What's like a floor for the CET1?

Question: Steve Scouten - Piper Sandler Companies - Analyst : So thinking about deposit growth a little bit. I think to me, you guys have always grown loans fantastically, but the strength of deposit growth has really been the welcome part of the story that's been so exemplary. The 7% to 10% deposit growth I mean, I guess, is more of that weighted towards the newer markets, maybe the first part of that? And secondarily, the strength on the betas on the way down that you've had on deposits relative to loans. Do you think that's sustainable? Or could we have a little bit of a catch up there just as we move further down this path?

Question: Steve Scouten - Piper Sandler Companies - Analyst : Got it. Fantastic color there. And then you guys have always been just fantastic C&I loan growth has really been the focus apart from M&A has added some CRE in there. But with all these concerns around tariffs and the economy and uncertainty, I know you mentioned, Harold, I think, trucking leverage lending and so forth. How do you think about C&I lending today as people start to get more concerned? Do you start to take them in any way? Or do you increase reserves around small affluent lending? Or you can get from what you guys are seeing on the calendar? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 1:30PM, PNFP.OQ - Q1 2025 Pinnacle Financial Partners Inc Earnings Call

Question: Steve Scouten - Piper Sandler Companies - Analyst : Just what you're seeing on the ground as it pertains --

Question: Brett Rabatin - Hovde Group - Analyst : Wanted to ask, look at slide 44 with BHG, the thing that set out to me is just that the 30-day past due trends is really good on the consumer side. And just wanted to see -- I mean, everyone is waiting for the consumer to break. Just wanted to see if that was a function of what you guys consider to be underwriting standards? Or if there's anything else that's underlying that positive trend for the consumer past due trends for BHG?

Question: Brett Rabatin - Hovde Group - Analyst : Okay. And I'm surprised no one's asked a question about a pivot. Terry, you always say you grow through recessions. But in the press release, you talked about being nimble, assuming we did built into a recession, what does nimble mean for Pinnacle in terms of how they're -- how you guys are operating and what strategies you guys might do with the balance sheet or expansion?

Question: Brett Rabatin - Hovde Group - Analyst : Okay. And then if I can do one last quick one. I was a little surprised you guys started out the year at 100% incentive PAT ratio that you just mentioned, Terry, just given the uncertainty. Just wanted to maybe hear if that was a function of anything in particular.

Question: Anthony Elian - JPMorgan - Analyst : Just a follow-up to the previous question on the loan portfolios you're watching. Harold, could you size up for us the trucking portfolio in terms of outstanding balances, just given that may be the most stress run?

Question: Anthony Elian - JPMorgan - Analyst : Okay. Got it. And then my follow-up, just one on loan growth. So outstanding quarter again in the first quarter for loan growth, but that was before the tariffs were fully announced. I know you still expect a strong second quarter for loan growth but can you just dive a bit deeper anecdotally on what you've heard over the past two weeks from your customers in terms of CapEx, other investments they may be thinking about in their pipeline? And if they're making any adjustments now given the elevated uncertainty around tariffs?

Question: Anthony Elian - JPMorgan - Analyst : Right, Terry. And just a follow-up to that. So do you feel like your footprint across the Southeast, which is one of the fastest-growing markets in the country, gives you more insulation relative to other parts of the country in terms of eventually seeing economic loan demand come back and what that could mean for your overall loan growth outlook potentially above the guidance that you have?

Question: Brian Martin - Janney Montgomery Scott LLC - Analyst : Terry, just wondering if your sense today given hiring appears on track that if going to a new market appears more likely, given the pipelines you have in terms of recruiting? Or is that again, is that some of the other question maybe reading more into it? It just feels like mentioning it suggests that maybe it's getting more likely as some of these other markets are gaining traction in terms of hiring.

Question: Brian Martin - Janney Montgomery Scott LLC - Analyst : No. Thanks for clearing that, Terry. I understand. And it's been your strategy all along to look at new markets. So totally understand that. Just one other -- two other questions. Just in terms of loan growth, Harold, I think you said Construction had opened up a little bit, just in terms of the growth you -- the C&I growth that you put the slide there on has been strong. Would you expect these other buckets to continue or begin to start growing again, contributing to your loan growth outlook for the year, meaning the multifamily, the nonowner occupied and the construction, should we expect to see some growth there in the coming quarters?

Question: Brian Martin - Janney Montgomery Scott LLC - Analyst : Yes. No, perfect. And last one, just modeling, Harold, in terms of the tax rate, how should we think about the tax rate here in the coming quarters? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 1:30PM, PNFP.OQ - Q1 2025 Pinnacle Financial Partners Inc Earnings Call

Question: Brian Martin - Janney Montgomery Scott LLC - Analyst : Okay. So around 18% or so seems fair.